When you start your own business in Dubai, one of the most important things to think about is what kind of business entity to choose. Most of the time, you can choose between the mainland, a free zone, or an offshore entity. Each has its own pros and cons, and the right choice will depend on what your company does for business, who it wants to trade with, how it is owned, and other factors.
So, how do the types of businesses compare? Which one will help your business the most? Our blog goes into detail about these questions and compares the costs, problems, and benefits of each place.
1. Free Zone Company
Free zones are places where goods and services can be bought and sold, usually with lower taxes and customs fees. By doing business in one of Dubai's 30 free zones, you can get benefits like 100% foreign ownership, 100% tax exemption for corporations, 100% repatriation and capital funds, and 100% repatriation and capital funds.
Ownership Structure
One of the best things about setting up your business in Dubai's free zones is that you have full ownership of it. To start a business, you don't need a local sponsor or service agent.
Business Activity
You can't do business on the mainland as a company in a free zone. If you want to sell to people in the UAE, you will need to set up a company on the mainland with the help of a local sponsor.
Office Requirements
In each free zone, there is a wide range of office space options, from virtual desks to offices and even flexi-desks.
Visa Requirements
The number of visas you can get will depend on the size of the office space you rent and the type of free zone you are in. Most free zones in Dubai will let you get between 3 and 6 visas.
At DMCC, the number of visas your business can get depends on the size of the office you choose:
- Flexi desk: up to 3 visas.
- Serviced office: 4 to 5 visas depending on the size of the office.
- Physical space: 1 visa for every 9 square meters.
Cost of Setup
Costs vary greatly for setting up and running a business in one of Dubai's free zones. Here is a list of the four main fees for setting up and running a business in Dubai:
- Company Registration Fee
- Licence Fee
- Office Fee
- Share Capital
For a more in-depth look at how the costs of setting up a business in Dubai's different free zones vary.
2. Mainland Company
Companies that are based on the mainland, which are often called "onshore" companies, have access to the local market and markets outside of the UAE. To become a Mainland LLC company, you must get a licence from the Department of Economic Development (DED) of the emirate where you want to do business.
Ownership Structure
Before the new UAE laws on commercial company ownership went into effect, foreign business owners who set up a mainland company in Dubai could only buy 49% of the company's shares. A local sponsor had to buy the other 51%. But as of December 1, 2020, the UAE passed a law that lets foreigners own 100% of companies on the mainland. Since the resolution is so new, it has not yet been fully put into place or fully explained.
Business Activity
A business that is based on the mainland can do business anywhere in the UAE. They can also do business in any free zone in the United Arab Emirates.
Office Requirements
In contrast to a free zone or an offshore company, mainland companies must have an office space. The DED says that you have to rent at least 200 square feet of office space. Companies on the mainland are not allowed to have virtual offices.
Visa Requirements
For a company on the mainland, there are no restrictions on visas. The size of rented office space or a business facility determines how many residency visas can be given. So, the more office space your company has, the more work visas your company may be able to get. In general, one visa per 80 square feet is used to figure it out.
Cost of Setup
When a business owner starts a mainland company, some of the first costs they can expect are:
- License fee: The DED has different licence options, but the standard trade or service licence is usually 5% of the rent. A General Trading licence Instant licence, Merchant licence, and launch licence don't apply to this.
- Initial Approval from DED
- Dubai Chamber of Commerce
- Approval of trade name
- Office rent
- Attestation of Memorandum of Association (MoA)
- Drafting of contract and court agreement attestation
- Registration with Ministry of Economy
- Trade license fee
- UAE local Sponsorship fees depend on the nature of the business
3. Offshore Company
Offshore companies are not allowed to run any kind of direct business in the UAE. But an offshore company can be a shareholder in any UAE company on the mainland or in a free zone. This lets the offshore company enter the UAE market and do business through its subsidiary companies.
Ownership Structure
An offshore company can own the whole business, but it can't have a physical location in the UAE.
Business Activity
An offshore company in Dubai can do business anywhere in the UAE, including on the mainland and in any of the free zones.
Office Requirements
A company that is not based in the UAE cannot have a physical office there. Their office must be in a country other than the one they work in.
Visa Requirements
Visas can't be given out by companies in other countries. Only companies in Dubai/UAE that are on the mainland or in a free zone can give out resident visas.
Cost of Setup
Setting up an offshore business isn't too expensive. Setting up an offshore company in Dubai is the least expensive of the three options. This is because there are no minimum requirements for capital deposits before incorporation, and there are no costs associated with office space or getting a visa.
Choosing the Right Jurisdiction for Your Business
Your company doesn't have a "best" choice between a free zone on the mainland or one off the coast. Whether or not a jurisdiction is good for your business depends on its goals and strategies.
Here is a summary of what was talked about in the blog.
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Free Zone
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Mainland (Onshore)
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Offshore
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Ownership Structure
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100% foreign ownership
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100% foreign ownership
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100% foreign ownership
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Business Activity
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You can trade within the Free Zone and internationally. Trade within the UAE is possible through a local agent/distributor.
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You can trade throughout the UAE and internationally.
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They are free to do business outside the emirates. They cannot have a physical setup for doing business within the UAE.
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Office Requirements
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Not compulsory to have a physical office space. Many free zones in Dubai allow you to create a business licence by offering virtual/flexible desk solutions.
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Minimum 200 sq ft office.
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You are not allowed to have any physical office in Dubai.
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Visa Requirements
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Setting up your company in a Dubai free zone automatically makes you eligible for a visa. Visa costs differ per free zone.
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The number of residency visas granted is based on the size of leased office space. Generally, it is calculated as one visa per 80 square feet.
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No residency visas issues.
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Cost of Setup
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Medium-High
Setup costs strongly depend on which free zone area you select.
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High
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Low
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Set Up Your Business in DMCC
If you think the best thing to do is set up as a free zone entity, DMCC is your best bet. As the world's number one free trade zone and the centre of global commodity trading, DMCC offers your business benefits and services that can't be found anywhere else to help it succeed
Tags: Company Formation Dubai, Company Registration Dubai, Dubai Freezone Company Formation, Dubai Mainland Company Formation, Offshore Company Formation, DMCC Company Registration, Difference Between Mainland Free Zone Company Formation
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